Regs and Bacon

At one time not too long ago, North Carolina was populated with more pigs than people. While that’s no longer true, the state trails only Iowa among pork-producing states, and the industry employs roughly 46,000 North Carolinians, provides $3 billion in annual income and $7 billion in annual sales, and its 2,100 farms—80 percent of which are family-owned—are home to 8.8 million hogs, living on farms that range from 250 to 50,000 head.

For the past two decades, the industry has been increasingly regulated, as a way to manage hog waste and improve and preserve environmental quality. In 1997, a moratorium was placed on the expansion of existing hog farms and the development of new ones. Fast-forward 10 years later, and the moratorium became permanent, with a provision that new permits could be issued only to farms that meet five environmental performance standards: Elimination of discharge of animal waste to surface waters and groundwater through direct discharge, seepage or runoff, as well as substantial elimination of atmospheric emissions of ammonia, emissions of odor detectable beyond the boundaries of the parcel or tract of land on which the farm is located, the release of disease-transmitting vectors and airborne pathogens, and of nutrient and heavy metal contamination of soil or groundwater.

That same year, state legislators passed a renewable portfolio standard (RPS), which requires investor owned utilities to produce 12.5 percent of retail electricity sales from eligible renewable resources by 2022, and municipal utilities and electrical cooperatives have a target of 10 percent by 2018. Relatively small goals compared to many other states that have renewable energy mandates, but a landmark bill nonetheless, as it is the only state in the Southeast that has made law a mandatory RPS.

While the list of renewable energy sources a utility can derive its mandated power from is broad, the RPS has a specific carve-out for swine-based electricity—0.2 percent by 2019, or 284,000 megawatt hours—as well as one for poultry waste, provisions that apply to the state as a whole rather than each individual utility, each of which is responsible for meeting a portion of that requirement.

Coupled together, the environmental quality standards and renewable energy goals make a strong case to site renewable energy projects at hog farms.

Meeting Goals“The process of creating electricity usually meets four of five of the environmental performance standards,” says Angie Maier, spokeswoman for the North Carolina Pork Council. “It creates a situation in which a farmer, if the conditions are right, is able to utilize the renewable energy law to put a system in.”

The first project to take advantage was at Lord Ray Farm, a team effort of Duke University, Duke Energy and Google, that uses waste from over 8,600 hogs and produces 600 megawatt-hours (MWh) per year, beginning in 2011. After that, five more projects were built, ranging in size from 7,550 hogs to a ten-farm, 74,000-hog project, or from 200 MWh to 10,200 MWh per year, respectively. Most have been built on existing farms looking to seize the opportunity of renewable energy credits (RECs) and environmental benefits. “One farm has been permitted for expansion, and will have a renewable energy system,” Maier says, adding that the current projects range in sophistication and utilize a mix of covered lagoons and tank digesters. All produce electricity on the backend to earn RECs. “Recent ones have utilized a state renewable energy investment tax credit, a federal tax credit and RECs,” Maier says. Matters of whether or not a farm can get projects to pencil out usually isn’t an issue when a developer has the experience and understands all of the moving parts, according to Maier. “Hopefully, the RECS are enough to cover the cost, but ultimately, the utilities have these mandates and they have cost-recovery mechanics on the electric bills that customers get,” she says. “Technically, the process should be working.” Those charges typically range from 40 to 80 cents per customer bill per month.

Like many other states, there have been legislative attempts to freeze or dismantle the state’s RPS—the most recent of which was last fall—but the program creates an interesting dynamic in a red state where most legislators are opposed to wind, solar or other types of renewable energy, Maier points out. “We have found that they likely feel different about renewable energy created from swine or poultry waste, because agriculture is North Carolina’s number one industry,” she says. “We have a little bit of leverage there. Progess has been slow, but it’s progress nonetheless. We just need some more time to get projects off the ground.”

Maier says the NCPC is aware of seven additional projects in various stages, one of which is stuck in the interconnection phase. “We recently had a bill in committee to move all swine and poultry projects to the front of the interconnection cue for study and connection,” she says. “We want to get these projects connected and on their way, especially since there is a mandate for the utilities. They’re not meeting it [the RPS], so we need to make sure these projects get priority.”

Duke Energy is one of the prominent utilities in the state working to achieve compliance, and it recently announced involvement in several different swine-based initiatives. One is with Carbon Cycle Energy and will be located in Duplin, North Carolina. The project is massive—it will process waste from 10 to 20 farms, according to Jess Kutrumbos, director of communications. Under a 15-year term, Carbon Cycle is expected to produce more than 1 billion cubic meters of pipeline-quality methane a year, allowing Duke to yield about 125,000 MWh of renewable energy annually, enough to power about 10,000 homes for a year. Renewable natural gas produced at the facility will be cleaned, upgraded and injected into the pipeline and ultimately used to generate electricity of four of Duke Energy’s power plants, all of which are currently retired stations that previously ran on fossil fuels. They include the Buck Steam Station in Rowan County; Dan River Steam Station in Rockingham County; H.F. Lee Station Combined Cycle Plant in Wayne County; and Sutton Combined Cycle Plant in New Hanover County.

For Carbon Cycle Energy, North Carolina’s RPS was a key driving force in launching the project. “It was definitely influential in our site-selection process,” Kutrumbos says. “We strategically chooses project locations at the convergence of supply of organic waste feedstocks and access to natural gas pipelines, so those were additional contributing factors for this particular site selection.”

Design and permitting are underway, and early-phase site preparation is set to begin in the last quarter of the year, with heavy construction beginning in early 2017 and startup toward the end of that year.

Duke Energy also recently announced it has finalized a second deal in 2016 to buy captured methane gas derived from swine waste. The planned project in Kenansville, North Carolina, will be built at the heart of Smithfield Food’s pork operations and, via a number of digesters built by Optima KV LLC, will produce renewable natural gas that will be sent to two Duke Energy power plants: H.F. Lee Station Combined Cycle Plant in Wayne County, and Sutton Combined Cycle Plant in New Hanover County. The project is expected to be operational by next summer.

David Fountain, Duke Energy North Carolina’s president, has emphasized the project’s benefits and that it is cost-effective for utility ratepayers. The utility says it has remained under the RPS cost cap outlined in regulations, and, contrary to assertions made by opponents of the mandate, that it is not a cost burden to customers.

Once the last kinks in the process are worked out—from project proposal to the sale of RECs, including any interconnection cue issues—North Carolina is likely to see a boom of swine waste-based energy projects come online, not only benefiting the environment, but replacing fossil-based generation, creating renewable energy and driving economic value.